Federal Reserve and Forex
The Central Bank of the United States also known as the federal reserve or "the Fed".
"The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system." ~federalreseve.gov
Does Money Supply, Interest Rates and Balance Sheet Reductions suggest the Federal Reserve is complicit in bankrupting the Country?
Current Fed Funds Rate = 4.58%
Current GDP = 29 Trillion Dollars
Current Unemployment Rate = 4.2%(7.1M People)
Current Value of the Stock Market = Over 50 Trillion Dollars
The money supply is the total amount of money - cash, coins and balances in bank accounts - in circulation and is referred to as "M1", "The M2" is Savings and CD(certificate of deposits) account balances with under $100,000 + M1(cash/coins/bank balances). M2 has only declined a total of 4 times in the last 150 years and it is happening right now.
Fed raising interest rates causes Banks to tighten lending standards. Higher Interest Rates will decrease the amount of money loaned out which causes businesses to cost cut(invest less) and lay people off. Businesses return on investment is lower because the amount invested is lower due to less capital from loans and workers make less because more workers looking for jobs causes wages to decrease and less people with jobs will all contribute to a decrease the supply of money.
Do not Fight the Fed
In April 2022 Money Supply peaked at $21,722 Trillion Dollars then decreased by 4.75% to $20691 Trillion Dollars by October 2023. Money Supply decreased at the fastest pace since the great depression during that period. The Federal Reserve also raised rates 16 times during that same April 2022 to August 2023 time period. By comparison the Nasdaq 100 Index increased by 2.79% from $14,934T to $15,350T dollars per share during that time.
In 2024 the M2 Supply has finally started to increase while the Fed looks to keep interest rates high and lower its balance sheet. Since November 2023 M2 has increased by less than 1%(0.66) from $20705T to $20841T while the Nasdaq 100 index has increased by 28.24% from $14,834 to $19,023 per share by comparison. This discrepancy suggest that something is broken and the Fed needs to adjust policy to increase M2 supply or get market expectations back in order by unloading more of the 7.2 Trillion in assets it has been holding due to "bailing out" the economy multiple times.
The Wealth Gap has only widened
92.67% of the population make less than $250k a year and according to Yahoo Finance only 1.8m people are in the top 1% in the US, over 50% of the Stock Market is owned by the one percent. If the fed could distribute assets on its balance sheet at a benefit to the U.S. why are they not doing so? Why is the fed allowing the wealth gap to widen so much? How much of the M2 is in the stock Market? None of the M2 is in the stock market?
M2 Supply in 2000 According to Federal Reserve $4,666 Trillion Dollars.
M2 Supply in 2020 According to Federal Reserve $15,380 Trillion Dollars.
Printed more than 3 Trillion in 2020.
M2 Supply in 2024 According to Federal Reserve $20,754 Trillion Dollars.
Decreasing by amounts never seen before.
Starting in April of 2022 M2 decreased each month for 11 months consectutively and on May 2023 the first tick up finally and just barely happened. M2 supply continued to decrease for another 5 months consecutively until November of 2023. To put that in dollar value perspective the M2 Supply Index was priced at $15,432(TRILLION DOLLARS) beginning Feburary of 2020 while the Nasdaq 100 was listed at $9,016 per share. Today(May, 26 2024) the M2 supply has increased by 35% to 20,841(TRILLION DOLLARS) and the Nasday 100 is priced at $18,870 per share an increase of 109%. If M2 only needed to increase by 35% for the Nasdaq to increase by 109%. How much does M2 need to decrease for the Nasdaq to fall 10 or 20%?
